Government Programs Help Businesses Succeed
Small technology businesses can benefit from the Small Business Innovation Research program.

By Larry Lee

It has been barely a year since Susan M. Mercer, of the Policy Research Institute at the University of Kansas, prepared an eye-opening report called Kansas City Region Information Technology and Life Science Initiative: Focus Group and Interview Report. Two major themes surfaced in this report: the lack of venture capital and the lack of early stage entrepreneurs. The report also identified the need for legislators to get behind current state and federal programs that would help secure needed funding for early stage life science and technology entrepreneurs.

There are many innovative entrepreneurs in the region who need help in ferreting out capital, along with a number of legislators who are sincerely concerned about the technology commercialization in the Midwest. Area entrepreneurs have the ideas, but lack the capital needed to take the idea to the next level—commercialization.

Valuable but Overlooked Program
One of the most overlooked tools of early stage entrepreneurs is the Small Business Innovation Research Program (SBIR). The highly competitive SBIR program challenges early-stage entrepreneurs to discover their technological potential and provides them incentive to profit from the commercialization of their technology.

According to the U.S. Small Business Administration (SBA), the “SBIR program targets the entrepreneurial sector because that is where most innovation and innovators thrive.”

The SBIR program recognizes that the risk and expense of conducting serious R&D efforts are often beyond the means of many small businesses. The program gives small companies a competitive boost by reserving a specific percentage of federal R&D funds for small business.
“SBIR funds the critical startup and development stages and it encourages the commercialization of the technology, product, or service, which, in turn, stimulates the U.S. economy, according to the SBA.

The SBIR Program was established in 1982, strengthening small businesses’ role in the nation's research and development (R&D) arena. A 2005 VC Funds Overlang Survey indicates that, since 1982, high-tech innovation has been stimulated, with small businesses and entrepreneurs having yielded more than 45,000 technology patents and hundreds of billions of dollars in technology innovations.

SBIR Qualifications and System
Entrepreneurial SBIR applicants must have an American-owned and operated small business, and must meet certain eligibility criteria. The business must be for-profit, the principal researcher must be an employee of the business, and the company size is limited to 500 or fewer employees.

Each year, SBIR requires 10 federal departments and agencies to reserve a portion of their R&D funds for awards to small business. These are the departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Transportation, along with the

Environmental Protection Agency, National Aeronautics and Space Administration and National Science Foundation. These agencies designate R&D topics and accept proposals. Following submission of proposals, these departments and agencies make SBIR awards based on the small business’ qualifications, degree of innovation, technical merit and future market potential.

Three-Phase Program
Small businesses that receive SBIR awards or grants then begin a three-phase program. Phase I is the startup phase, during which awards of up to $100,000 support examination of the feasibility of an idea or technology for approximately six months.

During Phase II, awards up to $750,000 are granted to the entrepreneur to expand on Phase I results for as long as two years. During this phase, the small business owner performs the R&D work and evaluates commercialization potential.

Phase III is the period during which Phase II innovation moves from the laboratory into the marketplace. Since SBIR funds do not support this phase, the entrepreneur who is developing the idea or technology must find funding in the private sector or other non-SBIR federal agency funding.
Suman Saripalli is the regional program director for MoFAST, which serves bidders in the greater Kansas City region. He assists SBIR bidders in Kansas under the aegis of Kansas Technology Enterprise Corporation (KTEC), Topeka, Kan. Saripalli can be reached through the Institute for Entrepreneurship and Innovation at University of Missouri–Kansas City at (816) 235-6063 or (573) 289-1246, or at .

Larry Lee is associate director of special projects at the Institute for Entrepreneurship and Innovation. He works with KCSourceLink to help small businesses find the right technology commercialization resources to meet their needs. KCSourceLink’s founding sponsors are the Ewing Marion Kauffman Foundation, the Henry W. Bloch School of Business and Public Administration at UMKC and the U.S. Small Business Administration. There is no cost involved in using KCSourceLink’s network services.

For more information, contact KCSourceLink at www.kcsourcelink.com, (816) 235-6500 or toll-free at (866) 870-6500 or .